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Arthur J. Gallagher's Buyout to Fortify California Footprint

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Arthur J. Gallagher & Co. (AJG - Free Report) recently acquired R.T. Beers & Company Insurance Services, Inc. that will not only enable it to expand abilities but also improve its service portfolio in Southern California. However, financial details of the transaction were kept under wraps.

Long Beach, CA-based R.T. Beers & Company operates as a retail property/casualty broker, offering an exclusive group safety program for metal service centers. The company uses information as a tool to help its clients in risk identification and mitigation. R.T. Beers & Company caters to clients throughout the United States. On completion of the buyout, the acquired company will continue to operate from its current location.   

The latest integration is anticipated to be a substantial value addition to the acquirer’s already robust inorganic portfolio. R.T. Beers & Company provides its customers with a level of service, expertise and knowledge more valuable than a traditional broker’s offerings. This is because of its capability in detecting risk in advance, thereby serving its clients more efficiently and effectively. The buyout will enable the acquirer to enhance and extend its capabilities pertaining to its risk management service offering in Southern California and also utilize the intellectual talent provided by the team at R.T. Beers & Company. Therefore, the latest acquisition is expected to reinforce Arthur J. Gallagher’s strong inorganic growth profile and add capabilities to its insurance brokerage service portfolio.

With respect to strengthening its existence in California and driving its property/casualty and risk management services, Arthur J. Gallagher acquired Tyler Insurance Agency located in El Centro. This in turn, is likely to solidify the insurance broker’s prevalent abilities in serving agribusinesses, public entities, electric utilities, schools and construction firms.

Arthur J. Gallagher’s discreet M&A activity stands testament to its convincing inorganic growth strategy. In the first nine months, this Zacks Rank #3 (Hold) insurance broker has successfully closed 27 buyouts with annualized revenues of about $234 million. Moreover, its inorganic pipeline remains strong with about $500 million of revenues. It boasts an impressive growth profile, driven by organic sales plus merger and acquisition (M&A) activities. The company remains upbeat about its ability to tow in acquisition partners in its typical small tuck-in size at justifiable prices.

Mergers and acquisition activity, an inorganic growth strategy and one of the key trends in 2018, has been adding fuel to the already upbeat performance of the insurance industry.

Shares of the company have rallied 21.4% year to date, outperforming its industry’s rise of 11.5%. We expect top-line growth, smart acquisitions and a healthy capital position to push the shares up in the near term.

Other Integrations in the Insurance Space

We have been noticing insurers embracing the inorganic approach to enhance their respective portfolios for a while now. The insurance industry has been on a conspicuous acquisition spree, attributable to its all-time high available capital resource.

Recently, Brown & Brown, Inc. (BRO - Free Report) acquired Hays Companies to ramp up its employee benefits business.

Stocks That Warrant a Look

Two better-ranked stocks from the same space are Willis Towers Watson Public Limited Company (WLTW - Free Report) and eHealth, Inc. (EHTH - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Willis Towers operates as an advisory, broking and solutions company worldwide. The company delivered average four-quarter positive surprise of 7.13%.

eHealth provides private online health insurance exchange services to individuals, families and small businesses in the United States and China. The company pulled off average four-quarter earnings surprise of 29.03%.

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